Prospect that Opec might cut supply boosts oil price

London — Oil rose for a fourth session in a row on Monday, buoyed by the prospect that top exporter Saudi Arabia will push Opec and maybe Russia to cut supply towards the end of 2018.

Brent crude futures were up 24 US cents at $67.00 a barrel by 10am GMT, while US futures rose 38c to $56.84.

“Oil prices continued to recover … [as] the market will be watching closely for the possible impact of a [supply] cut,” said Sukrit Vijayakar, director of Indian energy consultancy Trifecta.

Oil cartel Opec, led by Saudi Arabia, is pushing for the group and its partners to reduce output by one-million to 1.4-million barrels per day to prevent a build-up of unused fuel.

“It appears that the market takes a production cut for granted. We’ll see if it is right after the next Opec meeting on December 6. It is not unreasonable to anticipate stable prices until then,” PVM Oil Associates strategist Tamas Varga said.

Russian Energy Minister Alexander Novak said on Monday that Russia, which is not an Opec member, planned to sign a partnership agreement with the group, and that details would be discussed at Opec’s December 6 meeting in Vienna.

Despite Monday’s gains, Brent is almost 25% below early October’s 2018 peak of $86.74, as evidence of slowing demand has materialised and output from the US, Russia and Saudi Arabia hit historic highs.

A US decision to grant waivers to some of Iran’s oil customers, who faced the prospect of a drop-off in supply from sanctions that came into force in early November, has also helped soothe concern about availability of crude.

A trade dispute between the US and China is one reason investors are a lot warier about the outlook for oil demand growth in 2019.

Fund managers cut their bullish exposure to crude futures and options to the lowest since mid-2017 earlier in November.

Weekly exchange data shows money managers hold a combined net long position equivalent to about 364-million barrels of US and Brent crude futures and options, down from more than 800-million barrels two months ago.

“The main trend remains bearish as investors no longer believe in a risk of supply tightness for crude,” ActivTrades chief analyst Carlo Alberto De Casa said.

Reuters